Dr. Angell's "Real-Estate Standard"
Jude Wanniski
December 16, 1997


Memo To: Wayne Angell, chief economist, Bear Stearns & Co.
From: Jude Wanniski
Re: “Property price inflation”

I'm beginning to suspect, Wayne, we will never agree on anything regarding money. That is because your views change from season to season, depending upon the dictates of the intellectual spot market. Now you are on a "Real-Estate Standard." The op-ed you wrote in the Journal today about "property-price inflation" is a hopeless mish-mash, ad hoc justification for your latest optimum gold price, i.e., $240. For you to announce that you and I agree on one thing, a stable purchasing power for the dollar, is absolutely absurd, Wayne, and I hope you will not repeat it to anyone. At one time I thought you and I agreed that the dollar's purchasing power of gold -- as a proxy for the general price level -- was correct at $350. When it got there, while you were still at the Fed, you broke the news that you secretly believed the dollar's purchasing power of gold was $330, but did not tell me about it until gold broke below $350. Then you told me you would really not get terribly upset until the dollar's purchasing power of gold got close to $300. Now, with gold at $282-285, you have decided gold is not a reliable proxy for the purchasing power of the dollar. Now, you say it is real property! A deflation cannot occur unless the price of real property declines! Insofar as gold still is on your scope, you suggest $240 might get us to zero inflation in terms of the Consumer Price Index -- which for years you have been arguing OVERSTATES inflation.

Don't tell me, Wayne, that the future will decide who is right and who is wrong. The future is here and the dollar deflation now burdening the world economy has brought misery to a sizeable fraction of the 6 billion people on earth at the bottom of the pyramid and continues to eat away at higher ground. You are free to keep moving the goal posts in order to score touchdowns, Wayne, but do not get angry at me for pointing this out to your cheering section. 

The bankruptcy rate in the United State has been climbing all year and will continue to climb. The only thing that has held it back was the cut in the capital gains tax, which partially offset the wicked monetary deflation you have been celebrating. In this new "Real Estate Standard" you have unveiled for readers of the Journal, I expect you to continue moving goal posts to score more touchdowns. So please tell me and Jack Kemp and Bob Bartley and the rest of the folks who used to take you seriously what square foot of real estate you designate ANYWHERE ON EARTH that must fall in its bid price as the signal for Greenspan to lower interest rates.